JPMorgan Chase (JPM) has given up on its efforts to forecast the price of crude oil as the Iran war drags on.
“For the first time since the start of the Iran conflict, we don’t have a baseline view,” said the largest U.S. commercial bank in a statement. “We simply don’t know how to model the endgame.”
JPMorgan assumed at the start of the war that several economic redlines would force U.S. President Donald Trump into an agreement to reopen the Strait of Hormuz waterway.
The redlines that JPMorgan had forecast included crude oil prices above $100 U.S., retail gas prices at the pumps near $5 U.S. per gallon, and 10-year Treasury yields above 5%.
“Six months later, many of those lines have been crossed, yet the exit strategy is less clear, not more,” said JPMorgan Chase.
The U.S. and Iran had reached an interim deal to reopen the Strait of Hormuz in June, but that agreement quickly collapsed and fighting has resumed.
Crude oil prices are now above $100 U.S., gas prices are above $5 U.S. a gallon in many U.S. cities, and the 10-year Treasury yield rose above 5% earlier this week.
At the same time, the price of diesel fuel is above $6 U.S. per gallon, a record high.
JPMorgan notes that there are no signs from the U.S. or Iran that they’re ready to de-escalate the fighting and get the Strait of Hormuz reopened, where 20% of the world’s oil is typically transported.
Exacerbating the situation, Ukraine continues to strike Russian oil refineries, driving global energy prices higher.
JPMorgan estimates that the fair price for Brent crude oil, the international standard, is about $90 U.S. per barrel. But it is currently trading near $105 U.S. a barrel.
But where prices go from here, and how the Iran war ends, is anyone’s guess, according to the bank.
JPM stock has gained 12% over the last year to trade at $349.31 U.S. per share.
